Two Words Every Charlotte NC Home Buyer and Seller Should Know
Two Words Every Charlotte NC Home Buyer and Seller Should Know
Major changes are coming on January 1, 2011 that will radically change how Charlotteans buy and sell real estate. That is the day when new Offer to Purchase and Contract forms take effect for every real estate transaction in North Carolina.
After the change, due diligence will become a term that every Charlotte NC home buyer and home seller should know. Why? Because the revised contract eliminates many of the contingencies in the current contract, such as inspection and financing contingencies. Instead buyers will have a “ due diligence period” during which they may investigate the property and determine whether they will be able to obtain a loan. At the end of the due diligence period, buyers can decide to continue with the contract or terminate it for any reason or no reason at all.
The following are some questions and answers about the new due diligence contract and its impact on Charlotte NC home sellers and home buyers.
What items should a buyer investigate during the due diligence period?
The new contract form outlines areas that a buyer should investigate. They include obtaining mortgage loan approval, home inspections, review of homeowners association covenants and restrictions, availability and cost of insuring the property, property appraisal, survey, title work, zoning and flood hazards. The buyer may conduct any other investigations that they want during this period.
How long will the due diligence period last?
The length of the due diligence period will be negotiated between buyer and seller. If this period is to cover getting loan approval, most likely it will have to be at least 30 days or as long as 45 days.
Is it fair to ask a seller to take his property off the market for 30 to 40 days without knowing that the transaction will close?
Sellers are given the opportunity to request a due diligence fee that gives the buyer the right to conduct his due diligence. This fee is given directly to the seller upon execution of the contract and is non-refundable.
How much is the due diligence fee?
The NC Real Estate Commission has given no guidance on the amount. It is negotiable between Charlotte NC home buyers and home sellers. Buyers will want to negotiate a lower amount and sellers will want a higher amount. The amounts may vary depending on whether the transaction takes place in a buyers’ market or a sellers’ market.
What about earnest money?
The contract form also provides for earnest money from the buyer. Earnest money is collected from the buyer at contract execution and deposited in an escrow account. If the buyer terminates the contract prior to the end of the due diligence period, the seller keeps the due diligence fee and the earnest money is refunded to the buyer. If the buyer continues the transaction beyond the expiration of the due diligence period but fails to close, the earnest money belongs to the seller.
Why did the NC Real Estate Commission and the NC Bar Association change to a due diligence contract?
The revised contract is designed to eliminate many of the disputes between buyers and sellers that occurred under the old contract form. The Commission has said that it wants to give buyers a time period in which to investigate and then make a decision without arguments over repairs or loan approvals. They hope decisions will be cleaner for buyers and sellers. At the end of the due diligence period, buyers can decide to “Buy or Not Buy” and sellers can decide to “Sell or Not Sell”.
Read more about a home buyer’s due diligence process.
The Basics of Due Diligence—Part 1
The Basics of Due Diligence—Part 2
Want to know more about buying and selling real estate in Charlotte NC? Visit www.CarolinaSmallTownLiving.com.
Copyright 2010. Carol Fox. Allen Tate Realtors. *Two Words Every Charlotte NC Home Buyer and Seller Should Know*